Leading clients toward high-value services

Considering the continuing movement away from commission-based compensation, as well as increased uncertainty in the public markets, the need for wealth-management firms to deliver higher-value financial services is becoming clear. That means delivering financial advice and planning that goes beyond investment management — something that many clients want, but aren’t getting anyway.

“Our research finds over 80% of clients express interest in financial advice and planning, yet half remain on the sidelines,” said EY in its 2019 Global Wealth Management Research Report. “[T]he providers who can engage them can lead the way in reshaping how wealth management is delivered to satisfy complex personal needs.

In a global survey of wealth-management clients, EY found a gap between the number of clients using a range of planning or advisor services and the number of those planning to use them. While 34% said they’re already getting financial education and training, 56% said they’re considering or planning to use them in three years.

The survey also found disparities when it comes to:

• Personal financial budgeting and planning (35% currently use the service, while 57% are considering or planning to do so);
• Insights into market trends and opportunities (37% vs. 56%);
• Holistic advice/coaching on life goals (38% vs. 50%);
• Discretionary asset allocation and portfolio management (39% vs. 52%); and
• Tax planning (39% vs. 53%).

According to the report, wealth-management clients often hesitate to engage because of fragmented products and services — they reportedly turn to an average of five different providers to address their various needs — as well as complicated fee structures. But at a more fundamental level, the services offered often just do not address a client’s full set of financial needs.

Goals-based solutions have allowed clients and users to define and track their process toward specific financial targets based on anticipated life milestones. While they have been a critical step forward, the report said clients need more.

“[W]orking toward these goals — whether for college, retirement or estate planning — represents only a part of someone’s financial life,” it said. “Clients need greater help with the day-to-day management of their finances, as well as support in achieving the level of financial independence that enables their broader life aspirations.”

EY also pointed to an opportunity for wealth managers to harness social media for planning. By following “breadcrumbs” that clients leave on social networks as they anticipate major life changes, advisors have an opportunity to dynamically profile and proactively engage them, as well as earn their trust at crucial times.

More opportunities could also be unlocked through client education. Clients with more “in-depth knowledge and awareness” are more than twice as likely to derive high value from wealth knowledge; three out of five clients who self-identify as having high investment knowledge say they realize the full high value that wealth managers provide, while four out of five say they see high value in specific investment products.

“[J]ust 20% of clients with ‘in-depth knowledge’ would consider moving their assets elsewhere in the next three years, compared with 40% of clients with low levels of investment knowledge,” the report added.

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